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Keep government support to help charities’ viability: SVA report

June 10th, 2020

The JobKeeper payment should be phased out slowly and JobSeeker payment retained at its current level as part of the COVID-19 recovery process and to help off-set the pandemic’s forecast dire impact on the nation’s charity sector.

A new report released last week by Social Ventures Australia and the Centre for Social Impact at the University of NSW paints a challenging picture for Australian charities in the aftermath of the debilitating impact of the health crisis.

The report recommends the Federal government retain the JobKeeper payment beyond its expected cut off in September, to avoid a sudden impact on the jobs market. It forecasts that the retention of the subsidy for at least six months after the crisis would help at least 1200 charities maintain their viability. After 12 months of post-COVID support, that figure increases to 2,300 or 70 per cent of Australian charities. Even with the current level of support, 60 per cent of the sector’s jobs are in charities that are financially vulnerable or at risk.

The report also urges the government to maintain the JobSeeker payment at a higher level than the former Newstart allowance to help reduce potential demand on charities and to stimulate the broader economy.

Included in the report’s six recommendations is the establishment of a Charities Transformation Fund, to act as a resource that provides expertise, capacity-building and advice for charities transitioning to the post-COVID “new normal’’. It also recommends making fundraising and philanthropy simpler to encourage more giving and separately, to support more research to build the charities’ sector. The report also urges the maintenance, and where needed, increased, funding for government-contracted services that charities provide.

At the heart of the report is a detailed analysis of the potential impact on Australian charities at a time when many of them will find themselves dealing with increased demand.

Central to understanding the depth of that impact is the data that shows 60 per cent of Australian charities were not in a strong financial position on the eve of the pandemic. Specifically, one in four charities had an operating surplus of less than five per cent.

Once COVID-19 arrived, the lockdown measures and the economic impacts had instant consequences for charities: in April, 85 per cent of charities said social distancing laws had affected their ability to carry on their work. In the same month, almost 80 per cent of 170 charities surveyed reported a drop in revenue of between 15 and 30 per cent.  A separate survey found that fundraising had also dropped, with 47 per cent of 350 charities reporting a significant decline in fundraising. The severe revenue impacts coincided with a marked increase in demand for many of their services.

The report states: “Charities have also benefited from broader support measures – for example, the Coronavirus Supplement to JobSeeker payment has assisted in managing demand for material aid support. While this support has been welcomed, many surveyed charities report that they are still in financial crisis. More than a third (39%) believe they have not received the support they need from government, philanthropy and peak bodies, and one third (33%) thought COVID-19 posed a significant threat to their viability. Organisations are also reporting that they will need to cut services as a result of revenue reductions, including in community development, NDIS services, and employment and training.’’

The stark forecast of the impact of the health crisis was modelled on a 20 per cent fall in revenue that would put 17 per cent of the nation’s charities at risk of closing in six months and more than 200,000 jobs lost across the sector. A further 88 per cent of charities would immediately make an operating loss.

CSI Chief Executive Professor Kristy Muir said most charities already ran with very tight margins and had little in reserve to fall back on in a crisis. ‘Governments, philanthropists, business, and charities need to work in partnership to ensure viability and long-term financial support for the not-for-profit sector so they can deliver on their purpose. ‘’

“While most charities and not-for-profits are creative, agile and efficient, their funding models are often not viable for impact. They are often cross-subsidising, unable to invest in organisational capacity and innovation and were already on very thin margins before COVID-19,’’ Professor Muir said.

Download the SVA report here: 'Will Australian charities be COVID-19 casualties or partners in recovery? A financial health check' here.

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